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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________to _______________.
COMMISSION FILE NUMBER 333-45678
SEQUIAM CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0875030
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 SUNPORT LANE, ORLANDO, FLORIDA 32809
(Address, including zip code, of principal executive offices)
407-541-0774
(Registrant's telephone number, including area code)
WEDGE NET EXPERTS, INC.
1706 WINDING RIDGE ROAD, KNOXVILLE, TENNESSEE 37922
(Former name, former address)
The number of shares of the Registrant's Common Stock outstanding as of May 15,
2002 was 24,233,000.
DOCUMENTS INCORPORATED BY REFERENCE
Transitional Small Business Disclosure Format (Check one): Yes [_] No [X]
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FORM 10-QSB
1ST QUARTER
WEDGE NET EXPERTS, INC.
INDEX
Page
----
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Accountants' Report . . . . . . . . . . . . . . . . . 3
Condensed balance sheet, March 31, 2002 (unaudited) . . . . . . . 4
Condensed statements of operations, three months ended March 31,
2002 (unaudited) and 2002 (unaudited), and September 21, 1999
(inception) through March 31, 2002 (unaudited) . . . . . . . . 5
Condensed statements of cash flows, three months ended March 31,
2002 (unaudited) and 2001 (unaudited), and September 21, 1999
(inception) through March 31, 2002 (unaudited) . . . . . . . . 6
Notes to condensed financial statements (unaudited) . . . . . . . 7
Item 2. Plan of Operation. . . . . . . . . . . . . . . . . . . . 9
PART 2 - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 13
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2
PART 1. ITEM 1. FINANCIAL INFORMATION
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders
Wedge Net Experts, Inc.
We have reviewed the accompanying balance sheet of Wedge Net Experts, Inc. (a
development stage company), as of March 31, 2002, and statements of operations
and cash flows for the three months ended March 31, 2002 and 2001 and for the
period from September 21, 1999 (inception) through March 31, 2002. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less ins cope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
Cordovano and Harvey, P.C.
Denver, Colorado
May 17, 2002
3
WEDGE NET EXPERTS, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEET
(Unaudited)
March 31, 2002
ASSETS
$ -
=================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities: $ -
-----------------
Commitment. . . . . . . . . . . . . . . . . . . -
Shareholders' equity:
Preferred stock. . . . . . . . . . . . . . . -
Common stock . . . . . . . . . . . . . . . . 4,733
Additional paid-in capital . . . . . . . . . 123,007
Deficit accumulated during development stage (127,740)
-----------------
Total shareholders' equity -
-----------------
$ -
=================
See accompanying notes to condensed financial statements
4
WEDGE NET EXPERTS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
September 21,
1999
Three Months Ended (Inception)
March 31, Through
------------------------ March 31,
2002 2001 2002
----------- ----------- ----------
Sales. . . . . . . . . . . . . . . . . . $ 1,825 $ 735 $ 3,572
----------- ----------- ----------
Operating expenses:
Stock-based compensation:
Organization costs. . . . . . . . . - - 2,800
Compensation . . . . . . . . . . . . . - 500 10,561
Contract labor . . . . . . . . . . . . 1,500 1,172 5,147
Contributed services (Note B). . . . . - - 49,630
Contributed rent (Note B). . . . . . . 600 600 6,000
Office . . . . . . . . . . . . . . . . 3,394 713 8,816
Professional fees. . . . . . . . . . . 9,840 250 13,998
Travel . . . . . . . . . . . . . . . . 1,755 624 4,827
Internet services. . . . . . . . . . . 2,567 1,200 7,262
Depreciation . . . . . . . . . . . . . - 1,030 5,951
Loss on equipment abandoned. . . . . . 11,262 - 11,262
Other. . . . . . . . . . . . . . . . . 634 38 4,508
----------- ----------- ----------
Total operating expenses (31,552) (6,127) (130,762)
----------- ----------- ----------
Operating loss (29,727) (5,392) (127,190)
Interest expense . . . . . . . . . . . . - - (550)
----------- ----------- ----------
Loss before income taxes (29,727) (5,392) (127,740)
Income taxes (Note C). . . . . . . . . . - - -
----------- ----------- ----------
Net loss $ (29,727) $ (5,392) $(127,740)
=========== =========== ==========
Basic and diluted loss per common share. $ (0.01) $ (0.00)
=========== ===========
Basic and diluted weighted average
common shares outstanding. . . . . . . 4,733,000 3,800,000
=========== ===========
See accompanying notes to condensed financial statements
5
WEDGE NET EXPERTS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
September 21,
1999
Three Months Ended (Inception)
March 31, Through
------------------- March 31,
2002 2001 2002
--------- -------- ---------------
Net cash used in operating activities . . . . . . $(20,552) $(6,048) $ (51,547)
--------- -------- ---------------
Cash flows from investing activities:
Equipment purchases . . . . . . . . . . . . . . - - (17,213)
--------- -------- ---------------
Net cash used in investing activities - - (17,213)
--------- -------- ---------------
Cash flows from financing activities:
Proceeds from issuance of notes payable . . . . - - 50,000
Capital contributions by officer. . . . . . . . - - 200
Proceeds from sale of common stock. . . . . . . - - 46,650
Payments for offering costs . . . . . . . . . . - - (28,090)
--------- -------- ---------------
Net cash provided by financing activities - - 68,760
--------- -------- ---------------
Net change in cash (20,552) (6,048) -
Cash, beginning of period . . . . . . . . . . . . 20,552 11,400 -
--------- -------- ---------------
Cash, end of period $ - $ 5,352 $ -
========= ======== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . $ - $ - $ -
========= ======== ===============
Income taxes . . . . . . . . . . . . . . . . $ - $ - $ -
========= ======== ===============
Non-cash financing activity:
Common stock issued in exchange for debt . . $ - $ - $ 50,000
========= ======== ===============
See accompanying notes to condensed financial statements
6
WEDGE NET EXPERTS, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE A: BASIS OF PRESENTATION
-----------------------
The financial statements presented herein have been prepared by the Company in
accordance with the accounting policies in its Form 10-KSB dated December 31,
2001, and should be read in conjunction with the notes thereto.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim period presented have been made. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
The Company is in the development stage in accordance with Statements of
Financial Accounting Standards (SFAS) No. 7 "Accounting and Reporting by
Development Stage Enterprises". As of March 31, 2002, the Company has devoted
substantially all of its efforts to financial planning, raising capital and
developing markets.
Financial data presented herein are unaudited.
NOTE B: RELATED PARTY TRANSACTIONS
----------------------------
Contributed rent
- -----------------
An officer contributed office space to the Company for the three months ended
March 31, 2002 and 2001. The office space was valued at $200 per month based on
the market rate in the local area and is included in the accompanying unaudited
condensed financial statements as rent expense with a corresponding credit to
additional paid-in capital.
NOTE C: INCOME TAXES
-------------
The Company records its income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". The Company incurred net operating losses during
the three months ended March 31, 2002 resulting in a deferred tax asset, which
was fully allowed for; therefore, the net benefit and expense resulted in $-0-
income taxes.
NOTE D: SUBSEQUENT EVENTS
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Effective as of April 1, 2002, we acquired Sequiam, Inc. pursuant to the
Agreement and Plan of Merger, as more fully described in our Form 8-K filed on
April 16, 2002. In connection with the acquisition, our issued and outstanding
common stock was increased from 4,733,000 shares to 24,233,000 shares.
Following the acquisition of Sequiam, Inc., our officers and directors resigned
and appointed Nicolaas H. Van den Brekel and Mark L. Mroczkowski as our officers
and directors. On May 1, 2002, our board appointed Dr. Bernard Luskin as the
third member of our board of directors. Dr. Luskin is an independent director
and currently owns none of our common stock.
7
WEDGE NET EXPERTS, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Following our special shareholders' meeting held on April 29, 2002, we changed
our name to Sequiam Corporation and changed the name of Sequiam, Inc. to Sequiam
Software, Inc., each effective as of May 1, 2002. Our common stock continues to
be traded on the OTC Bulletin Board under the new trading symbol: SQUM.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
This Quarterly Report on Form 10-QSB includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act of 1934, as amended. These include, among
others, the statements about our plans and strategies under the headings
"Management's Discussion and Analysis of Plan of Operations." When used in this
document and the documents incorporated herein by reference, the words
"believes," "expects," "anticipates," "intends," "plans," "estimates," or
similar expressions are intended to identify, in certain circumstances,
forward-looking statements. Forward-looking statements are not guarantees of
future performance and are subject to certain risks, uncertainties, and other
factors, some of which are beyond our control, are difficult to predict and
could cause actual results to differ materially from those expressed in
forward-looking statements. Although it is not possible to itemize all of the
factors and specific events that could affect the outlook of a technology
company like ours operating in a competitive environment, factors that could
significantly impact expected results include: the acceptance of our technology;
the effect of national and local economic conditions; our outstanding
indebtedness; the loss of key employees; competition from technologies developed
by other companies; the ability to attract and retain employees; delays in
completing the development of our new products caused by a lack of capital or
external causes beyond our reasonable control; and the ability to identify and
consummate relationships with strategic partners. Although we believe that our
plans, intentions and expectations reflected in or suggested by such forward-
looking statements are reasonable, we cannot assure that such plans, intentions
or expectations will be achieved. Actual results may differ materially from the
forward-looking statements made in this Quarterly Report on Form 10-QSB. We do
not intend to update any forward-looking statements, and we hereby disclaim any
obligation to update such forward-looking statements.
(1) Our plan of operation for the next twelve months.
(a) Recent developments.
During the quarter ended March 31, 2002, we did not have any available
credit, bank financing or other external sources of liquidity. We had very
little operating revenue, and as a result, our operations had not been a source
of liquidity. We needed to obtain additional capital in order to continue our
operations. In order to obtain capital, we needed to sell additional shares of
our common stock or borrow funds from private lenders. Our former officers and
directors believed it was is in the best interest of our shareholders to
discontinue the company's current business and attempt to acquire a new business
which may provide more value to our shareholders.
To further this objective, our former officers and directors agreed to
acquire Sequiam, Inc., a Delaware corporation, in a tax-free reorganization,
pursuant to an Agreement and Plan of Merger, dated March 1, 2002. We filed a
copy of the Agreement and Plan of Merger as an exhibit to our Form 8-K filed
with the Securities and Exchange Commission on April 16, 2002. Effective as of
April 1, 2002, we acquired Sequiam, Inc. pursuant to the Agreement and Plan of
Merger, as more fully described in our Form 8-K filed on April 16, 2002. In
connection with the acquisition, our issued and outstanding common stock was
increased from 4,733,000 shares to 24,233,000 shares.
9
Following the acquisition of Sequiam, Inc., our officers and directors
resigned and appointed Nicolaas H. Van den Brekel and Mark L. Mroczkowski as our
officers and directors. This change in control is more fully described in our
Information Statement filed on April 16, 2001 pursuant to Rule 14f-1. On May 1,
2002, our board appointed Dr. Bernard Luskin as the third member of our board of
directors. Dr. Luskin is an independent director and currently owns none of our
common stock.
Following our special shareholders' meeting held on April 29, 2002, we
changed our name to Sequiam Corporation and changed the name of Sequiam, Inc. to
Sequiam Software, Inc., each effective as of May 1, 2002. Our common stock
continues to be traded on the OTC Bulletin Board under the new trading symbol:
SQUM.
(b) Cash requirements and additional funds in the next twelve months.
Our new management is committed to investment in its newly acquired
subsidiary, Sequiam Software, Inc. A more detailed description of our plan of
operation for Sequiam Software, Inc. is included in our Form 8-K filed on April
16, 2002. Our Form 8-K filed on April 16, 2002, is hereby incorporated into
this report. In addition, more information about Sequiam Software, Inc. can be
found at www.sequiam.com. Our new management expects that we will need
---------------
additional capital over the next twelve (12) months before our operating
revenues equal expenses. We expect to obtain this additional capital through
traditional financing, convertible debt or the sale of additional equity stock.
In addition, we are currently negotiating the acquisition of Brekel Group,
Inc., a Delaware corporation ("Brekel Group") through a tax-free reorganization.
We expect to issue 11,000,000 new shares of common stock in exchange for all of
the issued and outstanding stock of Brekel Group, which includes all of the
equity interest in Brekel Group. We believe as a result of this acquisition, we
will have the opportunity to raise additional capital upon more favorable terms
and conditions to our existing shareholders.
The acquisition of Brekel Group is contingent upon satisfaction of a due
diligence investigation being conducted by our management and the management and
board of Brekel Group, and upon the approval of the shareholders of Brekel
Group.
Brekel Group is a leading provider of digital on-demand manufacturing and
publishing services to authors, corporate publishers and print buyers. Brekel
Group owns and operates the following businesses:
QuestPrint.
----------
QuestPrint is a digital on-demand manufacturing division that eliminates
the necessity of keeping large volumes of print inventory. It exemplifies the
10
models of POD (Print on Demand) DTP (Deliver then Print) digital warehousing and
one-to-one printing. Markets include commercial customers who create
significant documentation, and medium and large publishers with active backlists
and specialty titles. For more information about QuestPrint visit
www.questprint.com.
- ------------------
FirstPublish.
------------
The FirstPublish brand represents the niche in short-run publications. It
offers professional and aspiring authors of books and screenplays a web-based,
cost-effective alternative to traditional "vanity press". FirstPublish provides
several turnkey publishing services in an affordable package of bundled
services. The author can utilize FirstPublish with a manuscript in any format
and can use FirstPublish to produce a finished book. For more information about
FirstPublish visit www.firstpublish.com.
--------------------
Griffin Publishing Group.
--------------------------
Griffin Publishing Group is a trade book publishing company specializing in
Sports, Education Curriculum and Health and Fitness. Griffin Publishing Group
developed the "Learning Champions" product line, which are creative and
innovative educational programs for schools.
If we complete the acquisition of Brekel Group, we are committed to invest
in the marketing, development and distribution of all of Brekel Group's
products. We believe that Brekel Group's products are a valuable compliment to
the products offered by Sequiam Software, Inc. and can be marketed and
distributed to many of the same consumers of Sequiam's products.
(c) Summary of any product research and development and other
investments.
Sequiam.
-------
Our plan for Sequiam Software, Inc. includes investment in the research and
development of our software products, Sequiam and Sequiam link. In addition to
our investment in Sequiam's research and development, we plan to devote more
resources to the marketing, sales and distribution of Sequiam's existing
products. We believe that we have the potential to significantly increase
Sequiam's operating revenue by investment in marketing and distribution. We
will require additional capital liquidity in order to meet our goals with
respect to marketing, sales and distribution. We believe we have the
opportunity to raise such additional capital through traditional financing,
convertible debt or the sale of additional equity stock. We believe that if we
acquire Brekel Group, we will have an opportunity to raise such capital on terms
more favorable to our shareholders.
11
Brekel Group.
-------------
If we acquire Brekel Group, we intend to invest in research and development
of the products related to the current business of QuestPrint, FirstPublish and
Griffen Publishing Group. These products include: digital document warehousing,
variable data and web-enabled print on demand. In addition to our investment in
Brekel Group's research and development, we plan to devote more resources to the
marketing, sales and distribution of Brekel Group's existing products. If we
acquire Brekel Group, we believe that we could significantly increase Brekel
Group's operating revenue by investment in marketing and distribution. We would
require additional capital liquidity in order to meet our goals with respect to
marketing, sales and distribution of Brekel Group's products. Nonetheless, we
believe that if we acquire Brekel Group, we will have the opportunity to raise
such additional capital liquidity through traditional financing, convertible
debt or the sale of additional equity stock.
(d) Expected purchase or sale of plant and significant equipment.
We currently occupy approximately 14,500 square feet of office space in
Orlando, Florida pursuant to a sublease with Brekel Group. Our space is part of
a building also currently occupied by Brekel Group, and we believe this facility
will be sufficient to maintain our business operations over the next twelve
months, even if we acquire Brekel Group.
We currently own equipment sufficient to continue the operations of Sequiam
Software, Inc. over the next twelve months. To grow the business, we expect to
invest a modest amount of our capital investment and operating revenue in
upgrading our existing equipment and purchasing new equipment. The amount of
these expenses are dependent, in part, upon our acquisition of Brekel Group.
We believe that Brekel Group currently owns equipment sufficient to
continue its operations over the next twelve months. We anticipate acquiring
all such equipment in the acquisition of Brekel Group. To grow the business, we
expect to invest a modest amount of our capital investment and operating revenue
in upgrading Brekel Group's existing equipment and purchasing new equipment for
Brekel Group.
(e) Expected significant changes in the number of employees.
We currently have ten full-time employees. These employees include our new
officers identified in our Information Statement and Form 8-K, each filed on
April 16, 2002. We plan to increase this number to thirty over the next twelve
months. We plan to have eight of these new employees devoted to marketing and
sales. We plan to have another twenty-two of these employees devoted to
development and distribution of our products.
If we acquire Brekel Group, we expect to add an additional thirty-two
full-time employees. We plan to increase this number by an additional eight
over the next twelve months. We plan to have most of these new employees
devoted to publishing and print on demand.
12
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2.1 Agreement and Plan of Merger, dated March 1, 2002, included as an Exhibit
to our Form 8-K filed on April 16, 2002, is hereby incorprated by this
reference as Exhibit 2.1.
3.1 Certificate of Amendment to Articles of Incorporation of Wedge Net Experts,
Inc., dated April 29, 2002.
10.1 Employment Agreement ~ Nicolaas Van den Brekel, dated as of March 1, 2002.
10.2 Employment Agreement ~ Mark Mroczkowski, dated as of March 1, 2002.
20.1 Schedule 14A, Proxy Statement, filed on April 19, 2002, is hereby
incorporated by this reference as Exhibit 20.1.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter
ending March 31, 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SEQUIAM CORPORATION
Date: May 20, 2002 By: /s/ Nicolaas H. Van den Brekel
---------------------------------------------------
Nicolaas H. Van den Brekel, Chief Executive Officer
By: /s/ Mark L. Mroczkowski
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Mark L. Mroczkowski, Chief Financial Officer
14